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M&A: When Being in the Majority is Bad News
Emily Slayton
When you're looking to grow, a merger or acquisition deal can be an attractive proposition. But the unfortunate truth is that most mergers and acquisitions fail—anywhere between 70% and 90%, according to McKinsey and the Harvard Business Review.
The reasons behind the high failure rate are manifold, with the most frequent being:
Inaccurate valuation
Unsuccessful integration
Culture clashes
High cost of recovery
Failure to assess alternatives
There are plenty more, but these challenges alone hint at the complexity of an M&A deal. And though some companies reach out to freelance M&A consultants for help, many attempt to close the deal using the resources they already have on-hand—or assume they must engage a costly traditional consulting firm if they need help vetting, closing, and integrating a new deal.
However, even experienced in-house specialists can overlook the nuances of an unfamiliar market or overestimate the project's potential. Consulting firms, meanwhile, may overlook important nuances about the realities of how your company does business. This is often what leads to integration struggles or unrealistic projections—and ultimately, failure.
Given how complicated these deals can be, it's easy to imagine all the things that could go wrong. So why do mergers and acquisitions continue to be so common? And how can you keep yours from becoming just another statistic?
The motivation behind M&A
Executives pursue mergers and acquisitions for a variety of reasons. Smaller companies don't have access to the economies of scale that a larger company does, making growth an economic challenge. And many larger companies want to grow their market share by diversifying, yet they don't always have the in-house talent or technology to do so.
There are competitive reasons, as well. Acquiring smaller companies can help larger companies effectively remove the competition. If you can't beat 'em, buy 'em, as the saying goes. We've seen this happen in the beer industry a lot recently, as "big beer" companies acquire craft breweries to expand their reach in an otherwise inaccessible market. But once a craft brewery is acquired, it is no longer considered "craft." As a result, this strategy has managed to slow the smaller segment's growth considerably.
Regardless of the impetus, one thing remains consistent across all M&A activities: the stakes are high. And as such, the two (or more) different entities must come together seamlessly to be successful. This is where a third-party perspective of an independent M&A advisor is particularly valuable.
Resisting the statistic
Despite a staggering failure rate, not all mergers and acquisitions fizzle. Some succeed spectacularly: Disney and Pixar, JP Morgan and Chase, Exxon and Mobile, to name a few. These are cases in which no detail was too small and every angle was objectively examined before, during, and after. But when you're on the inside looking out, it can be hard to be objective.
And it's why freelance M&A consulting is essential at each stage of the project. With a unique combination of classical strategy training and practical executive experience, freelance M&A consultants can help with:
When a company wants to grow inorganically, it helps to have a seasoned professional who can help identify potential acquisition targets or explore the ways in which it can merge with companies where synergies already exist. An outside perspective offers the objective insight needed to create a foundation for a smart strategy.
When it comes time for due diligence, the competitive bid process requires decisions to be made quickly. Companies look to independent M&A specialists for support so that they don't lose time or make costly mistakes in their haste.
Even after the details of a merger or acquisition are finalized and all the papers are signed, the toughest challenge still lies ahead. The process of integrating two companies is extremely complex, and few companies have the ability to navigate it using only in-house resources. A freelance mergers and acquisitions expert can add agile, cost-effective support to smooth the transition, plugging into existing workflows while adjusting more readily to broader team structures and culture.
Throughout the process, it's important to fully understand where the value of the merged or acquired business resides. This should drive the strategy as well as the integration. For example, if the business model is what you're after, then consider how it will work in tandem with your current offering. If market dominance is your goal, then it's likely you'll want to keep the resources and leave the business model behind.
How BTG's freelance M&A experts drive success
There's a lot of money on the line with M&A projects. And when there are also a lot of question marks around the bidding process or post-merger integration, BTG's freelance M&A consultants can help fill in the blanks.
We connect companies with independent consultants and executives who possess deep M&A advisory experience. From developing a smart acquisition strategy to planning and executing the actual integration, our consultants can help you untangle and streamline the erratic workflow of early-stage M&A and support your internal resources with specialized skills and insight.
Roughly 67% of our talent has both consulting and operational experience, and 78% have held executive roles at major corporations. By combining on-the-ground executive expertise with extensive technical expertise, they are able to deliver a pragmatic view that goes beyond the usual abstract analyses. They can ramp up or down as needed, without adding the significant overhead and risk of a permanent hire.
We'll help you select the right team from a pool of thousands of McKinsey, Bain, EY, Deloitte, Booz, BCG, Accenture, and Capgemini alumni—and more than 2,000 alumni of specialty and boutique consulting firms. Here are just a few examples of past successes:
If you're currently considering M&A, don't go it alone. BTG can help you join the other companies that found success by tapping an independent consulting team for support. Tell us about your project so we can get started!
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Emily is an award-winning writer who specializes in B2B marketing. She has been helping global brands reach targeted audiences to drive sales and awareness for more than 15 years. As a small business owner herself (skeletonkeybrewery.com), she understands what it's like to source a team that can scale with sudden growth.
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